November 16, 2006 Mr. Tom Langel Amerimont, Inc. 112 S. Broadway Manhattan, MT 59714 Dear Mr. Langel, Please note the following price quote for a 10 Million gallon per year biodiesel refinery in Montana: COST OF THE EQUIPMENT Renu Energy and/or its suppliers (RENU) will build, ship and test through ASTM or EN standards a nominal 10 million gallon per year (MGPY) pre-assembled, biodiesel factory that processes triglycerides and free fatty acids for the following FOB prices. Parallel flow upgrade kits are included with the quote that can increase the capacity of the factory to a nominal 18 mgpy. In this configuration, the factory would only process triglycerides. These prices are correlated to the in battery items included with the accompanying technical proposal. These prices are valid for 30 days: Prices for In Battery Items: Qty of Cost per Total Cost Items Modules Module TG Modules 2 4,350,000 8,700,000 Parallel Flow Upgrade Kit 2 440,000 880,000 Spare Parts Kit 2 364,000 728,000 Catalyst Contract 2 95,000 190,000 Total 10,498,000 1
Estimated Prices for Out of Battery Items: RENU can also offer the following out of battery items. Please note the following abridged list with approximate prices. If this is of interest, a comprehensive list with actual prices can be developed. This list would be presented at our engineering review, which is expected to take place approximately one month after placing the order. The out of battery items can range from $1 million to $2 million: Item Qty Cost/Item Total Cost Building 1 300,000 est 300,000 est Room Fireproofing 1 100,000 est 100,000 est Fire Suppression Equipment 1 50,000 est 50,000 est Methanol Cooling Tower 2 30,000 est 60,000 est Methanol Tank 1 30,000 est 30,000 est Methanol Recovery Tank 1 30,000 est 30,000 est Sodium Methoxide Tank 1 30,000 est 30,000 est Sulfuric Acid Tank 1 30,000 est 30,000 est Glycerin Tank 1 30,000 est 30,000 est Tank Piping 1 50,000 est 50,000 est Boiler 1 150,000 est 150,000 est Compressors 6 25,000 est 150,000 est Air Dryers 6 1,000 est 6,000 est Diking 1 75,000 est 75,000 est Fencing 1 75,000 est 75,000 est Offloading Rack 1 150,000 est 150,000 est On-loading Rack 1 150,000 est 150,000 est Total 1,466,000 est Payment Schedule for Purchase: 20% upon receipt of order 20% after engineering review 20% one month after engineering review 20% upon siting equipment 10% upon completion of system integration tests 10% upon successful ASTM/EN certification of biodiesel Payment Schedule for Joint Ventures: 2
90% of equity share assigned to Renu Energy upon forming the joint venture 10% of equity share assigned to Renu Energy upon successful ASTM/EN certification of biodiesel Delivery Schedule: Engineering Review Equipment Sited System Integration Tests ASTM/EN Certification 1st month ARO 6th month ARO 7th month ARO 7th month ARO Warranty: The plant will be installed at your site with up to one week s training of your workers. Once the factory is producing ASTM D6751 or EN 14214 specifications, the system will be transferred to your company s operation. RENU offers a one year parts and labor warranty for manufacturer s defects. Disclaimer: The following information is based solely on assumed parameters and does not reflect commercially tested parameters. Please view this information as an attempted representation of the factory s performance and not the actual factory performance. The commercial factory performance may vary dramatically from the information offered in this price quote. The delivery schedule is subject to change with notice. Notes: Feed Tanks: Included with the cost of each module are 3 double walled 25,000 gallon feed tanks. These can be removed from the delivered system for a credit of $40,000.00 each totaling $120,000.00. Product Tanks: Included with the cost of each module are 3 single walled 25,000 gallon product tanks. These can be removed from the delivered system for a credit of $30,000.00 each totaling $90,000.00. Parallel Flow: If the feedstock chosen has less than.5% free fatty acids (such as soybean oil or canola oil), the system can be reconfigured to eliminate the reactor that processes free fatty acids (the esterification reaction) and add a second reactor that processes triglycerides (the transesterification reaction). This will increase each 5 million gallon mixed feedstock module to having an output of 9 million gallons. The size of the module will remain the same. This modification costs $440,000.00. The factory can be easily reversed back to processing free fatty acids without additional capital costs. If the feedstock is comprised of 3% free fatty acids or less, an option can be selected to process only the triglycerides using the two triglyceride reactors in parallel. The free fatty acids in the feedstock would be converted into soap. The soap is separated from the biodiesel by one of the two polishing steps (water wash or active filtration). This method increases the production capacity to 9 million gallons less the percentage of free fatty acids in the feedstock. A parallel flow factory processing a feedstock that contains 3% ffa would yield 8.73 million gallons per year. Monitoring Equipment: The factory comes with an Allen-Bradley monitoring system. Syncing this system with a pre-existing monitoring system would incur an NRE (non-recurring engineering) cost of $170,000.00. To achieve remote monitoring, a telecommunications line of at least 53 Kbps should be installed. 3
Spare Parts Kit: A level one spare parts kit costs $364,000.00 per module. The kit contains items such as a magnetron, pumps, pump seals, etc. In the event of an unexpected shutdown, the kit will have all the necessary parts needed to get the factory up and running within a day. Training: Once the factory meets ASTM and EN specifications, RENU will spend up to a week, at no additional cost, to train your company s staff to operate the factory and to perform level one maintenance. Tech Support: The parts and equipment are sold with a one-year parts and labor guaranty. Beyond this warranty period, a phone support contract is available for $500.00 per month. Non-contract phone support is also available for $80.00 per hour. A technician is also available to be on site beyond the warranty period for $120.00 per hour, plus travel expenses. Catalyst contract: RENU s technology uses a special solid catalyst and a microwave reactor. At present there are no signs of a catalyst deactivation mechanism. However, depending on the feedstock used, catalyst pores may become clogged over time. RENU requires an annual catalyst maintenance contract to replace and dispose of the used catalyst. The cost is $95,000.00 per year per module. The contract includes a maximum of 12 replacements per year. The dimensions of the reactor are 8 long x 7 in diameter. It weighs approximately 370 pounds. Once the routine replacement is made, we request that the old reactors be sent back to RENU. The customer is responsible for the freight to and from the factory. Upon receipt, RENU will send your company a new set of reactors. An extra set of reactors will be maintained on site at all times to avoid down time. At any time, our customers can also choose to replace RENU s catalyst system with a conventional catalyst system that uses public domain technology. Dopant: To enhance the reaction a liquid catalyst dopant (ei sodium methoxide) is added to the feedstock. We estimate the amount needed to be 2,500 ppms or less (22,500 gallons per year) per module. The amounts used are added automatically by the system. The cost of the dopant is not included with the catalyst contract. Polishing Steps: RENU uses a water wash or an active filtration bed as a polishing step. One of the polishing steps can be selected at no additional capital cost: Active Filtration Bed (ie. Magnosol): Its use in a TG system requires approximately 60.3 lbs/hr. Its use in a TG/FFA system requires approximately 45.6 lbs/hr. Once used, this material must be disposed. Water Wash. Its use requires an amount of water equal to one third of the amount of feedstock. Once used, the water must be disposed. Cooling Tower: Approximately 800 gallons/hr of water (6,604,800 gallons a year) is also used to cool the methanol dryer. Approximately 535 gallons (2/3) are evaporated and approximately 265 gallons (1/3) are disposed. The cooling tower is not included with the cost of factory and needs to be purchased separately. Process Lines: The process lines are insulated and heat taped to allow start-up after a shutdown in cold weather. This is especially needed for feedstocks that contain high free fatty content. Power: RENU recommends the use of a steam boiler with the module. The boiler is not included in the cost of the factory and must be purchased separately. The boiler can be powered by electricity, heating fuel 4
or natural gas. The boiler can power some but not all of the factory s functions. Below is a summary of the energy requirements of the various components of the factory: For TG/FFA modules the feed tanks, methanol tower, etc (steam driven) requires 1,251 kw For TG modules the feed tanks, methanol tower, etc (steam driven) requires 776 kw For TG/FFA modules the pumps and microwaves (electricity only) requires 250 kw For TG modules the pumps and microwaves (electricity only) requires 250 kw To process only triglycerides the boiler requires 2,200 pounds/hour of steam at 100 psi of pressure for one module. To process triglycerides and free fatty acids, the boiler requires 5,500 pounds/hour of steam at 100 psi of pressure for one module. Economies of scale can be gain when powering several modules. Maintenance: The module will require the following periodic replacements: 6 Filters every day $4.25/filter (est.) $8,772.00/yr 2 Solid Mineral Reactors every month $3,958.33/reactor. $95,000.00/yr 2 Magnetrons every six months $30,000.00/mag. (est) $120,000.00/yr 10 Pump Seals every five years $1,500.00/pump seal (est) $3,000.00/yr Estimated Total $226,772.00/yr Compressors: Three 25 horse powered compressors are used with the factory. One creates a nitrogen blanket to suppress the methanol and the other is used to create compressed air. The compressors are not included with the cost of the factory and must be purchased separately. Feedstock: The feedstock must be degummed, contain no solids, have less than.1% water and less than 1% MIU (moisture, insolubles and unsaponifiables). The amount of phosphatides that is acceptable to go through our system after degumming is 440 ppms or less and/or 10 ppm or less of phosphorus. Fire Suppression System: A fire suppression system may be required by local code. If so, this would be an additional cost. Building: A separate building is not required for the factory operation as the modules are built to sit outdoors. A building however may be desired for crew comfort and lavatory facilities. If so, water and sewage lines will be required. A block building was recently built in nearby Clairton, PA for $294,000 with one set of rest rooms, 4,000 sq ft of space, two 10 ft roll up doors and a loading dock. A factory office trailer costing approximately $30,000.00 can also be used. 5
Labor: The recommended number of laborers needed to run the factory is 2 per shift. Each set of laborers can handle many modules simultaneously. The factory runs 24 hours a day, 7 days a week. The factory will run for 344 days a year or longer. Any production beyond 344 days would be considered additional production beyond the 9 million gallons per year. Consumables: Apart from the feedstock, the dopant and a negligible cost in filters, the only other consumable is alcohol. Each module requires approximately 10% of the feedstock by weight (12% by volume) of alcohol a year. Any alcohol can be used including methanol, ethanol, isopropanol and butanol. Rail Access: For joint venture partners, RENU will manage the construction of a rail spur by a third party. The approximate cost would be $30,000.00 for a switch and $80.00/foot for tracks. Loading Racks: For joint venture partners, RENU will manage the construction of a rail loading rack and/or a truck loading rack by a third party. The approximate cost of a rail loading rack is $142,000.00. The approximate cost of a truck loading rack is $134,000.00. A rack to load both rail cars and trucks can be combined for approximately half the cost of each. Concrete Pad: The factory modules are placed on a 6 concrete pad. For joint venture partners, RENU will manage the construction of a concrete pad by a third party. The approximate cost of the concrete pad is $20,000.00. Dikes: Local regulations may require dikes to be placed around the tanks and the factory. For joint venture partners, RENU will manage the construction of dikes. The approximate cost would be $34,000.00 for dikes around the tank farm and $20,000.00 for tanks around the factory. The Biodiesel Production Facility Each module contains three 25,000 gallon double wall feed tanks, three 25,000 gallon single wall product tanks, a feed system, two transesterification systems, inter-process tanks, and product and control systems. These components, with the exception of feed tanks and product tanks will arrive in four 8 ft x 8.5 ft x 40 ft containers. One container will hold the 38 high methanol drying tower, one will hold the spare parts kit and two will hold the biodiesel process. Once assembled the biodiesel process will be skid mounted and be 12 5 high. The skids can be put end to end or side to side. If put in a building 6 of clearance is recommend on all sides of the module. It is recommended that the building be at least 22 high. The factory module production quantities are based on a 344 days year at 24 hours per day and are approximations. In addition to biodiesel, the factory will produce up to 10% of the total production by weight of glycerin (depending upon the quantity of triglycerides in the feedstock - free fatty acids do not produce glycerin). One man month of engineering will be conducted at the onset of the project to most effectively integrate the factory with existing facilities, if need be. This engineering phase will also determine the mix of process technologies to be delivered. 6
ABOUT RENU Energy and its partners provide new, more efficient. and faster processes for the production of biodiesel. These new processes use the transesterification path, which differs from most conventional processes in two ways. First, it uses a solid catalyst, and second, it uses a continuous flow process, not a batch process. RENU also has a second single step process to convert both free fatty acids and triglycerides into biodiesel simultaneously. These new processes enable the cost effective manufacturing of a broader range of fuel products at a lower cost than previously attainable. These processes also permit the use of a wider variety of raw material feedstock. The resulting fuel products are cheaper to manufacture and are of higher quality than those produced by any other technology. Conclusion: Biodiesel is a renewable, biodegradable, non-hazardous green fuel that does not contribute to global warming or acid rain, and produces less particulate emissions than conventional petroleum based diesel. It has a higher cetane number and greater lubricity than petroleum based diesel. Biodiesel manufacturing and its use is a rapidly growing industry with international demand. Using RENU Energy s process, given present day prices and proper selection of feedstocks, enables a biodiesel factory to operate profitably without the need of government subsidies. The demand for biodiesel seems to be growing worldwide. We look forward to doing our part in helping to meet this demand and to a long and fruitful relationship with our customers and joint venture partners for many years to come. Cordially, David Baker Vice President of Communications +(1) 407.892.1914 7